Rural broadband vs. red tape

Fed agencies square off on how to spend $7 billion to bring the Net to 'unserved' areas. Let the squabbling begin.

Anu Partanen, contributor

Last Updated: March 27, 2009: 10:07 AM ET

NEW YORK -- President Obama's $7 billion-plus plan to bring broadband to rural America could create up to 260,000 new jobs, according to researchers. But some industry executives worry it
will take too long to put that money to work.

Raul Katz, director of strategy at the Columbia Institute for Tele-Information and an adjunct scholar at the university's business school, says he's "very confident" that rural broadband
deployment could create hundreds of thousands of jobs. But first the federal government has to hand out the $7.2 billion it has earmarked to bring high-speed Internet to underserved areas
of the U.S. And that, analysts say, could take many more months.

Under Obama's stimulus bill that Congress approved in February, the Department of Agriculture's Rural Utility Services, the Department of Commerce and the Federal Communications
Commission, will deploy the money. Before broadband builders can get the money, though, the agencies must determine which areas qualify, and exactly how to define broadband.

All the money has to be out the door by September 30, 2010. In the past, this time frame might have seemed like fast action for the cumbersome bureaucracies, but in the current economic
climate many regard it as hopelessly slow.

A big part of the delay is that the stimulus bill doesn't define "rural" areas and "unserved" or "underserved" communities. Neither does it state how fast the connections should be. These
definitions are left for the agencies to handle, and in a place like Washington D.C. that is not an easy task.

"You would think intuitively that the meaning of 'unserved' or 'underserved' would be somewhat obvious, but as you can imagine, in a town of lawyers, there's lots of agendas," says Gary
Bolton, vice president of global marketing at Adtran (ADTN), a telecom gear maker that could
benefit from broadband deployments.

Many industry experts argue that the best way to make such choices is to evaluate applications on a case by case basis, since all areas and situations are different. But others contend
that the rules need to be spelled out clearly in order for all applicants to have an equal opportunity to tap the funds. Indeed, some small-business advocates worry that without clear
definitions for applicants, the process will favor the established telecom companies, such as AT&T (T, Fortune 500) and Verizon (VZ, Fortune 500), which already have greater resources and large Washington lobbying
staffs to press their cases.

In the meantime, the government's goals for the broadband stimulus -- new jobs and better connectivity for those living outside metro areas -- seem to be on hold.

According to Katz's calculations the construction of new or upgraded broadband networks would create 128,000 jobs over a four-year period, assuming a mixture of different technologies
such as fiber and wireless.

This number takes into account the actual construction work, such as digging trenches, manufacturing the equipment needed and the ripple effects, such as the construction workers'
families using the pay checks to buy services. Calculations are based on census data and studies from previous broadband building projects.

The more difficult question is how many jobs rural broadband will create after the infrastructure is in place. Clearly users' lives will improve. With broadband people living in rural
areas can get better access to education, health care, entertainment and the president's latest YouTube appearances. These social impacts have been high on President Obama's list of
reasons for extending broadband.

It is also widely believed that for example distance learning will create new and better job opportunities for people benefiting from it, but these impacts are difficult to quantify.

According to Pew Research, 55% of adult Americans already have broadband Internet connections at home. Ten percent have a dial-up connection. And 27% of Americans do not use the Internet
at all.

When the dial-up and non-Internet users were asked why they do not have broadband, availability was not the biggest reason. They just didn't find it relevant to them and felt it costs too
much.

"In general the people that need broadband already bought it and have it," Columbia's Katz says. "So the question is, if we create ten new lines, are they going to generate a lot of GDP
compared to the ones that have been adopted earlier. That's a big question. We just don't know."

Still, Katz estimates that another 130,000 jobs will be created by the availability of broadband in rural areas, mostly by small- to medium-sized enterprises that will be able to do new
things or offer new services with the availability of broadband. A newly wired small company might need to contract with a tech support staff, say, or hire additional warehouse workers if
a new e-tailing site takes off.

There's little question broadband deployment would offer lots of opportunities, but until the money is allocated, estimates like the ones coming of out Columbia University are indeed
academic.